Companies that provide online travel content should be feeling
pretty good about themselves after a series of recent deals from
suitors with deep pockets.
One of those companies,TripAdvisor (
), has seen its shares spike higher in recent weeks thanks to a
move by Liberty Interactive to take control of its shares.
TripAdvisor is a provider of online travel information and
reviews. It bills itself as the largest travel site in the world
with more than 60 million unique monthly visitors, 36 million
marketable members and more than 75 million reviews and opinions.
More than 60 new contributions are posted every minute.
Those kinds of numbers likely played a big part in Liberty's
decision to pay a premium for control of TripAdvisor.
On Dec. 11, Liberty bought about 5 million shares of
TripAdvisor's common stock from media mogul Barry Diller and the
Diller-von Furstenberg Family Foundation. The price came to
roughly $62.50 a share, or about $312 million.
The transaction gave Liberty control of about 22% of
TripAdvisor's common stock and 57% of its voting stock.
TripAdvisor, which was spun off fromExpedia (
) in December 2011, saw its shares spike as much as 22% on the
day the deal was announced before closing up 6.5% to 40.91.
Shares have since risen another 10% and currently trade near
Not long after that deal, Expedia said it would buy a 61.6%
equity stake in trivago, a German search engine that focuses on
hotels, for roughly $632 million in cash and common stock.
In November,Priceline.com (
) said it would acquireKayak Software (
) for about $1.8 billion. Kayak's website lets travelers compare
prices and make reservations for hotels, flights, cars and
These kinds of deals serve to underscore the value of leading
players in the online travel sector, analysts say.
"The deals caused a lot of excitement in the space and helped
improve sentiment that was already very good," said Kevin
Kopelman, an analyst at Cowen & Co. "They also highlighted
TripAdvisor, which is much larger than either Kayak or trivago
and stands out as the obvious non-Priceline, non-Expedia
In a note, JPMorgan analyst Doug Anmuth said the Liberty deal
"is not likely to have any direct impact" on TripAdvisor's
But, he adds, the premium Liberty paid for the shares "could
be viewed as a positive indication of TripAdvisor's growth
potential in 2013."
Financially, TripAdvisor has delivered solid sales growth
during its first year as a publicly traded company, though its
profit growth has been spottier.
The top line increased at least 16% during the first three
quarters of 2012. Year-over-year earnings were flat during the
first quarter and down 5% during the second, though they came in
12% higher during the third quarter.
TripAdvisor is slated to report fourth-quarter earnings Feb.
13. Analysts expect a gain of 17%.
The company offers its services free to users. It gets most of
its revenue from click-based and display ads, mainly from hotels,
airlines and cruise operators.
TripAdvisor also gets fees from subscriptions, content
licensing and other businesses such as SniqueAway, a members-only
website that features hotels with a minimum four-star rating
classification and a minimum four out of five TripAdvisor review
The company does not operate as an online travel agency.
Instead, it provides information and links that let users book
directly with hotels and other businesses.
Reviews are a big part of TripAdvisor's business model. Users
can provide ratings for hotels, tourist sites, cities and
Those reviews have come under fire amid concerns about their
authenticity and fairness. Much of the complaining has been done
by hotels and other businesses that received poor reviews.
In response, TripAdvisor launched a customer support line that
lets hotels report reviews they deem unfair. The company has also
cited its own surveys showing that 98% of its users trust the
reviews on its website.
Most analysts downplay the issue.
"It's a total nonissue," Kopelman said. "In our survey work,
TripAdvisor users were overwhelmingly satisfied with their
The company hasn't had much problem attracting visitors.
Kopelman points out that TripAdvisor is "the most searched-for
online travel brand in the world and also has the most unique
TripAdvisor gets about half its revenue from the U.S. Much of
the rest comes from the U.K. and other European countries. That
revenue stream bodes well for the company in coming quarters,
"We expect upside from strengthening U.S. and European
economies, growth in global travel, and a desire by more hotels
to move away from online travel agencies to lower booking fees,"
noted Laura Martin, an analyst at Needham & Co.
TripAdvisor logged third-quarter revenue of $212.7 million, up
18% from the prior year and slightly ahead of Wall Street
estimates. Traffic to TripAdvisor's websites increased by about a
third in the quarter.
Earnings gained 12% to 46 cents a share, topping views by 4
Revenue from click-based advertising climbed 15% to $168
million. Revenue from display-based advertising rose 12% to $23.6
million, while revenue from subscriptions and other sources
increased 53% to $21.1 million.
TripAdvisor has focused part of its recent growth strategy on
its mobile platform.
The company launched its mobile website three years ago and
has added apps for the iPhone, Android, Nokia, Palm smartphones
as well as the iPad. It boasts about 35 million unique mobile
"TripAdvisor is clearly being used a lot on smartphones, and
particularly on tablets, and they have been moving toward a more
user-friendly system," Kopelman said.